Currently, the automatic penalty model “makes no distinction between a
customer who misses a deadline by a day or two,” and someone who
disregards the deadline entirely.

In the document, open for responses until May, HMRC adds: “[Automatic
penalties are] more costly and resource intensive for HMRC to pursue
than larger better-focused penalties.

“They also result in a substantial amount of customer contact for HMRC and so have an impact on the use of HMRC resources.”

The department points out that before February 2012
the late-filing penalty was cancelled if no tax was owed but, since
then, the penalty has stood irrespective of an outstanding tax debt.

“Following this change,”
reflects HMRC, “the proportion of on-time filing improved
significantly, but it means some customers receive a penalty where there
is no tax at risk.”

The Revenue also said the "reasonable excuse"
provisions have been put in place so penalties can be removed, but it
now recognises that the “rules may need updating” to better support
taxpayers who genuinely want to comply.